Offtake Contract Due Diligence
What to check before you fund.
What it covers
The offtake contract is the repayment source on most GPU loans, and the clauses that decide it are delivery dates, cure periods, termination and security. A missed deployment date can let the customer walk and take back prepaid fees.
What you should check for
| Revenue | Take-or-pay amount and term | Committed spend, term and start date, and whether the commitment survives a delivery slip. |
| Payment security | Prepayment, deposit, letter of credit, guarantee or escrow. IREN's Microsoft contract requires 20% of each tranche up front. | |
| Debt service follows delivery | Payments start when the cluster bills, with interest-only until then. | |
| Delivery and performance | Ready-for-service date | A date the hardware allocation and the colo's power date can both meet, with the acceptance test defined. |
| Cure period | Long enough to replace a failed delivery or move the cluster; 30-45 days is typical. | |
| SLA credits | Credit levels and caps, and whether repeated misses become a termination right. | |
| Exit | No termination for convenience | Plus credit support: SharonAI's $1.25B contract with ESDS has both, including $140M in letters of credit. |
| Assignment to the lender | Collateral assignment of the contract and consent to step in, so the revenue can follow the cluster to a backup operator. |
Sources: GPU Lenders (American Compute), American Compute.
What the contract has to carry
A missed deployment date is typically a breach with a 30-45 day cure, after which the offtaker can terminate and take back prepaid fees. Larger Blackwell orders wait 6-9 months for hardware, so the cure period and the lead time have to fit together.
Uptime commitments sit in the same contract. Check that the site and configuration can deliver the uptime, power and delivery dates it promises. Contract interpretation is for your counsel.
Red flags
| LOI at funding | A letter of intent is not revenue. Some offtakers walk at the last minute. |
| Capacity cuts on request | Requests to defer delivery, cut reserved capacity or move to on-demand are early default signals. Microsoft dropped a couple hundred MW of leases in February 2025 (TD Cowen). |
| Cure period shorter than lead time | If replacement hardware takes 6-9 months and the cure is 30 days, any delivery problem ends the contract. |
Discuss a transaction
Send us the equipment list and the loan or lease you have in mind. We will come back with an indication and the questions we would need answered.
Prefer email? hello@amcompute.com